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Exposures
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Event Codes
Accident
Solicit support
Agree
Demand
Yield to order
Human death
Warn
Endorse
Adjust
Sports contest
Host meeting
Propose
Force
Reject
Release or return
Offer peace proposal
Yield
Demonstrate
Covert monitoring
Reward
Promise
Yield position
Acknowledge responsibility

Wiki	Wiki Summary
Arithmetic	Arithmetic (from Ancient Greek ἀριθμός (arithmós) 'number', and τική [τέχνη] (tikḗ [tékhnē]) 'art, craft') is an elementary part of mathematics that consists of the study of the properties of the traditional operations on numbers—addition, subtraction, multiplication, division, exponentiation, and extraction of roots. In the 19th century, Italian mathematician Giuseppe Peano formalized arithmetic with his Peano axioms, which are highly important to the field of mathematical logic today.
Operation Mincemeat	Operation Mincemeat was a successful British deception operation of the Second World War to disguise the 1943 Allied invasion of Sicily. Two members of British intelligence obtained the body of Glyndwr Michael, a tramp who died from eating rat poison, dressed him as an officer of the Royal Marines and placed personal items on him identifying him as the fictitious Captain (Acting Major) William Martin.
Special Activities Center	The Special Activities Center (SAC) is a division of the Central Intelligence Agency responsible for covert operations and paramilitary operations. The unit was named Special Activities Division (SAD) prior to 2015.
Operations management	Operations management is an area of management concerned with designing and controlling the process of production and redesigning business operations in the production of goods or services. It involves the responsibility of ensuring that business operations are efficient in terms of using as few resources as needed and effective in meeting customer requirements.
Emergency operations center	An emergency operations center (EOC) is a central command and control facility responsible for carrying out the principles of emergency preparedness and emergency management, or disaster management functions at a strategic level during an emergency, and ensuring the continuity of operation of a company, political subdivision or other organization.\nAn EOC is responsible for strategic direction and operational decisions and does not normally directly control field assets, instead leaving tactical decisions to lower commands.
Operations research	Operations research (British English: operational research), often shortened to the initialism OR, is a discipline that deals with the development and application of advanced analytical methods to improve decision-making. It is sometimes considered to be a subfield of mathematical sciences.
Surgery	Surgery is a medical or dental specialty that uses operative manual and instrumental techniques on a person to investigate or treat a pathological condition such as a disease or injury, to help improve bodily function, appearance, or to repair unwanted ruptured areas.\nThe act of performing surgery may be called a surgical procedure, operation, or simply "surgery".
Bitwise operation	In computer programming, a bitwise operation operates on a bit string, a bit array or a binary numeral (considered as a bit string) at the level of its individual bits. It is a fast and simple action, basic to the higher-level arithmetic operations and directly supported by the processor.
Operation (mathematics)	In mathematics, an operation is a function which takes zero or more input values (called operands) to a well-defined output value. The number of operands (also known as arguments) is the arity of the operation.
Financial statement	Financial statements (or financial reports) are formal records of the financial activities and position of a business, person, or other entity.\nRelevant financial information is presented in a structured manner and in a form which is easy to understand.
Financial ratio	A financial ratio or accounting ratio is a relative magnitude of two selected numerical values taken from an enterprise's financial statements. Often used in accounting, there are many standard ratios used to try to evaluate the overall financial condition of a corporation or other organization.
Financial law	Financial law is the law and regulation of the insurance, derivatives, commercial banking, capital markets and investment management sectors. Understanding Financial law is crucial to appreciating the creation and formation of banking and financial regulation, as well as the legal framework for finance generally.
Financial analysis	Financial analysis (also referred to as financial statement analysis or accounting analysis or Analysis of finance) refers to an assessment of the viability, stability, and profitability of a business, sub-business or project. \nIt is performed by professionals who prepare reports using ratios and other techniques, that make use of information taken from financial statements and other reports.
Form 10-K	A Form 10-K is an annual report required by the U.S. Securities and Exchange Commission (SEC), that gives a comprehensive summary of a company's financial performance. Although similarly named, the annual report on Form 10-K is distinct from the often glossy "annual report to shareholders," which a company must send to its shareholders when it holds an annual meeting to elect directors (though some companies combine the annual report and the 10-K into one document).
Federal takeover of Fannie Mae and Freddie Mac	In September 2008 the Federal Housing Finance Agency (FHFA) announced that it would take over the Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage Corporation (Freddie Mac). Both government-sponsored enterprises, which finance home mortgages in the United States by issuing bonds, had become illiquid as the market for those bonds collapsed in the subprime mortgage crisis.
Yoda conditions	In programming jargon, Yoda conditions (also called Yoda notation) is a programming style where the two parts of an expression are reversed from the typical order in a conditional statement. A Yoda condition places the constant portion of the expression on the left side of the conditional statement.
Dirichlet conditions	In mathematics, the Dirichlet conditions are sufficient conditions for a real-valued, periodic function f to be equal to the sum of its Fourier series at each point where f is continuous. Moreover, the behavior of the Fourier series at points of discontinuity is determined as well (it is the midpoint of the values of the discontinuity).
Nervous Conditions	Nervous Conditions is a novel by Zimbabwean author Tsitsi Dangarembga, first published in the United Kingdom in 1988. It was the first book published by a black woman from Zimbabwe in English.
Wolfe conditions	In the unconstrained minimization problem, the Wolfe conditions are a set of inequalities for performing inexact line search, especially in quasi-Newton methods, first published by Philip Wolfe in 1969.In these methods the idea is to find\n\n \n \n \n \n min\n \n x\n \n \n f\n (\n \n x\n \n )\n \n \n {\displaystyle \min _{x}f(\mathbf {x} )}\n for some smooth \n \n \n \n f\n :\n \n \n R\n \n \n n\n \n \n →\n \n R\n \n \n \n {\displaystyle f\colon \mathbb {R} ^{n}\to \mathbb {R} }\n . Each step often involves approximately solving the subproblem\n\n \n \n \n \n min\n \n α\n \n \n f\n (\n \n \n x\n \n \n k\n \n \n +\n α\n \n \n p\n \n \n k\n \n \n )\n \n \n {\displaystyle \min _{\alpha }f(\mathbf {x} _{k}+\alpha \mathbf {p} _{k})}\n where \n \n \n \n \n \n x\n \n \n k\n \n \n \n \n {\displaystyle \mathbf {x} _{k}}\n is the current best guess, \n \n \n \n \n \n p\n \n \n k\n \n \n ∈\n \n \n R\n \n \n n\n \n \n \n \n {\displaystyle \mathbf {p} _{k}\in \mathbb {R} ^{n}}\n is a search direction, and \n \n \n \n α\n ∈\n \n R\n \n \n \n {\displaystyle \alpha \in \mathbb {R} }\n is the step length.
Conditions (album)	Conditions is the debut studio album by Australian rock band The Temper Trap, released in Australia through Liberation Music on 19 June 2009. It was later released in the United Kingdom on 10 August 2009.
Standard temperature and pressure	Standard temperature and pressure (STP) are standard sets of conditions for experimental measurements to be established to allow comparisons to be made between different sets of data. The most used standards are those of the International Union of Pure and Applied Chemistry (IUPAC) and the National Institute of Standards and Technology (NIST), although these are not universally accepted standards.
Karush–Kuhn–Tucker conditions	In mathematical optimization, the Karush–Kuhn–Tucker (KKT) conditions, also known as the Kuhn–Tucker conditions, are first derivative tests (sometimes called first-order necessary conditions) for a solution in nonlinear programming to be optimal, provided that some regularity conditions are satisfied.\nAllowing inequality constraints, the KKT approach to nonlinear programming generalizes the method of Lagrange multipliers, which allows only equality constraints.
Contract	A contract is a legally enforceable agreement that creates, defines, and governs mutual rights and obligations among its parties. A contract typically involves the transfer of goods, services, money, or a promise to transfer any of those at a future date.
Minsk agreements	The Minsk agreements were a series of international agreements which sought to end the war in the Donbas region of Ukraine. The first, known as the Minsk Protocol, was drafted in 2014 by the Trilateral Contact Group on Ukraine, consisting of Ukraine, Russia, and the Organization for Security and Co-operation in Europe (OSCE), with mediation by the leaders of France and Germany in the so-called Normandy Format.
Non-disclosure agreement	A non-disclosure agreement (NDA), also known as a confidentiality agreement (CA), confidential disclosure agreement (CDA), proprietary information agreement (PIA), secrecy agreement (SA), or non-disparagement agreement, is a legal contract or part of a contract between at least two parties that outlines confidential material, knowledge, or information that the parties wish to share with one another for certain purposes, but wish to restrict access to. Doctor–patient confidentiality (physician–patient privilege), attorney–client privilege, priest–penitent privilege and bank–client confidentiality agreements are examples of NDAs, which are often not enshrined in a written contract between the parties.
Good Friday Agreement	The Good Friday Agreement (GFA), or Belfast Agreement (Irish: Comhaontú Aoine an Chéasta or Comhaontú Bhéal Feirste; Ulster-Scots: Guid Friday Greeance or Bilfawst Greeance), is a pair of agreements signed on 10 April 1998 that ended most of the violence of the Troubles, a political conflict in Northern Ireland that had ensued since the late 1960s. It was a major development in the Northern Ireland peace process of the 1990s.
Prenuptial agreement	A prenuptial agreement, antenuptial agreement, or premarital agreement (commonly referred to as a prenup), is a written contract entered into by a couple prior to marriage or a civil union that enables them to select and control many of the legal rights they acquire upon marrying, and what happens when their marriage eventually ends by death or divorce. Couples enter into a written prenuptial agreement to supersede many of the default marital laws that would otherwise apply in the event of divorce, such as the laws that govern the division of property, retirement benefits, savings, and the right to seek alimony (spousal support) with agreed-upon terms that provide certainty and clarify their marital rights.
Master service agreement	A master service agreement, sometimes known as a framework agreement, is a contract reached between parties, in which the parties agree to most of the terms that will govern future transactions or future agreements.\nA master agreement delineates a schedule of lower-level service agreements, permitting the parties to quickly enact future transactions or agreements, negotiating only the points specific to the new transactions and relying on the provisions in the master agreement for common terms.
1991 Paris Peace Agreements	The Paris Peace Agreements (Khmer: សន្ធិសញ្ញាសន្តិភាពទីក្រុងប៉ារីស ឆ្នាំ១៩៩១; French: Accords de paix de Paris), formally titled Comprehensive Cambodian Peace Agreements, were signed on October 23, 1991, and marked the official end of the Cambodian–Vietnamese War and the Third Indochina War. The agreement led to the deployment of the first post-Cold War peace keeping mission (UNTAC) and the first ever occasion in which the UN took over as the government of a state.
Equity (finance)	In finance, equity is ownership of assets that may have debts or other liabilities attached to them. Equity is measured for accounting purposes by subtracting liabilities from the value of the assets.
Liability (financial accounting)	In financial accounting, a liability is defined as the future sacrifices of economic benefits that the entity is\nobliged to make to other entities as a result of past transactions or other past events, the settlement of which may result in the transfer or use of assets, provision of services or other yielding of economic benefits in the future.\n\n\n== Characteristics ==\nA liability is defined by the following characteristics:\n\nAny type of borrowing from persons or banks for improving a business or personal income that is payable during short or long time;\nA duty or responsibility to others that entails settlement by future transfer or use of assets, provision of services, or other transaction yielding an economic benefit, at a specified or determinable date, on occurrence of a specified event, or on demand;\nA duty or responsibility that obligates the entity to another, leaving it little or no discretion to avoid settlement; and,\nA transaction or event obligating the entity that has already occurredLiabilities in financial accounting need not be legally enforceable; but can be based on equitable obligations or constructive obligations.
Limited liability company	A limited liability company (LLC) is the US-specific form of a private limited company. It is a business structure that can combine the pass-through taxation of a partnership or sole proprietorship with the limited liability of a corporation.
Contingent liability	Contingent liabilities are liabilities that may be incurred by an entity depending on the outcome of an uncertain future event such as the outcome of a pending lawsuit. These liabilities are not recorded in a company's accounts and shown in the balance sheet when both probable and reasonably estimable as 'contingency' or 'worst case' financial outcome.
Legal liability	In law, liable means "responsible or answerable in law; legally obligated". Legal liability concerns both civil law and criminal law and can arise from various areas of law, such as contracts, torts, taxes, or fines given by government agencies.

Risk Factors
QUANTA SERVICES INC ITEM 1A Risk Factors Our business is subject to a variety of risks and uncertainties, including, but not limited to, the risks and uncertainties described below
The risks and uncertainties described below are not the only ones facing our company
Additional risks and uncertainties not known to us or not described below also may impair our business operations
If any of the following risks actually occur, our business, financial condition and results of operations could be harmed and we may not be able to achieve our goals
This Annual Report also includes statements reflecting assumptions, expectations, projections, intentions, or beliefs about future events that are intended as “forward-looking statements” under the Private Securities Litigation Reform Act of 1995 and should be read in conjunction with the section entitled “Uncertainty of Forward-Looking Statements and Information,” included in Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations
” Our operating results may vary significantly from quarter to quarter
We experience lower gross and operating margins during winter months due to lower demand for our services and more difficult operating conditions
Additionally, our quarterly results also may be materially and adversely affected by: • the timing and volume of work under contract; • regional or general economic conditions; • the budgetary spending patterns of customers; • variations in the margins of projects performed during any particular quarter; 11 _________________________________________________________________ [60]Table of Contents • a change in the demand for our services caused by severe weather conditions; • increases in construction and design costs; • the termination of existing agreements; • losses experienced in our operations not otherwise covered by insurance; • a change in the mix of our customers, contracts and business; • payment risk associated with the financial condition of our customers; • changes in bonding and lien requirements applicable to existing and new agreements; • costs we incur to support growth internally or through acquisitions or otherwise; • the timing of acquisitions; and • the timing and magnitude of acquisition integration costs
Accordingly, our operating results in any particular quarter may not be indicative of the results that you can expect for any other quarter or for the entire year
An economic downturn may lead to less demand for our services
Because the vast majority of our revenue is derived from a few industries, a downturn in any of those industries would adversely affect our results of operations
The telecommunications and utility markets experienced substantial change during 2002 and 2003 as evidenced by an increased number of bankruptcies in the telecommunications market, continued devaluation of many of our customers’ debt and equity securities and pricing pressures resulting from challenges faced by major industry participants
These factors contributed to the delay and cancellation of projects and reduction of capital spending, which impacted our operations and our ability to grow at historical levels
A number of other factors, including financing conditions for and potential bankruptcies in the industries we serve, could adversely affect our customers and their ability or willingness to fund capital expenditures in the future or pay for past services
In addition, consolidation, competition or capital constraints in the electric power, gas, telecommunications or cable television industries may result in reduced spending by, or the loss of, one or more of our customers
Our industry is highly competitive
Our industry is served by numerous small, owner-operated private companies, a few public companies and several large regional companies
In addition, relatively few barriers prevent entry into some of our industries
As a result, any organization that has adequate financial resources and access to technical expertise may become one of our competitors
Competition in the industry depends on a number of factors, including price
Certain of our competitors may have lower overhead cost structures and, therefore, may be able to provide their services at lower rates than we are able to provide
In addition, some of our competitors have greater resources than we do
We cannot be certain that our competitors will not develop the expertise, experience and resources to provide services that are superior in both price and quality to our services
Similarly, we cannot be certain that we will be able to maintain or enhance our competitive position within our industry or maintain a customer base at current levels
We also may face competition from the in-house service organizations of our existing or prospective customers
Electric power, gas, telecommunications and cable television service providers usually employ personnel who perform some of the same types of services we do
We cannot be certain that our existing or prospective customers will continue to outsource services in the future
We may be unsuccessful at generating internal growth
Our ability to generate internal growth will be affected by, among other factors, our ability to: • expand the range of services we offer to customers to address their evolving network needs; • attract new customers; • increase the number of projects performed for existing customers; • hire and retain qualified employees; and • open additional facilities
12 _________________________________________________________________ [61]Table of Contents In addition, our customers may reduce the number or size of projects available to us due to their inability to obtain capital or pay for services provided
Many of the factors affecting our ability to generate internal growth may be beyond our control, and we cannot be certain that our strategies will be successful or that we will be able to generate cash flow sufficient to fund our operations and to support internal growth
If we are unsuccessful, we may not be able to achieve internal growth, expand our operations or grow our business
Our financial results are based upon estimates and assumptions that may differ from actual results
In preparing our consolidated financial statements in conformity with accounting principles generally accepted in the United States, several estimates and assumptions are used by management in determining the reported amounts of assets and liabilities, revenues and expenses recognized during the periods presented and disclosures of contingent assets and liabilities known to exist as of the date of the financial statements
These estimates and assumptions must be made because certain information that is used in the preparation of our financial statements is dependent on future events, cannot be calculated with a high degree of precision from data available or is not capable of being readily calculated based on generally accepted methodologies
In some cases, these estimates are particularly difficult to determine and we must exercise significant judgment
Estimates are primarily used in our assessment of the allowance for doubtful accounts, valuation of inventory, useful lives of property and equipment, fair value assumptions in analyzing goodwill and long-lived asset impairments, self-insured claims liabilities, revenue recognition under percentage-of-completion accounting and provision for income taxes
Actual results for all estimates could differ materially from the estimates and assumptions that we use, which could have a material adverse effect on our financial condition, results of operations and cash flows
Although we maintain insurance policies with respect to automobile, general liability, workers’ compensation and employers’ liability, those policies are subject to deductibles of dlra1dtta0 million to dlra2dtta0 million per occurrence, and we are primarily self-insured for all claims that do not exceed the amount of the applicable deductible
We also maintain a non-union employee related health care benefit plan that is subject to a deductible of dlra250cmam000 per claimant per year
Losses up to the deductible amounts are accrued based upon our estimates of the ultimate liability for claims incurred and an estimate of claims incurred but not yet reported, with assistance from a third-party actuary
However, insurance liabilities are difficult to assess and estimate due to unknown factors, including the severity of an injury, the determination of our liability in proportion to other parties, the number of incidents not reported and the effectiveness of our safety program
If we were to experience insurance claims or costs significantly above our estimates, our results of operations could be materially and adversely affected in a given period
Our casualty insurance carrier for prior periods is experiencing financial distress, which may require us to make payments for losses that otherwise would be insured
Our casualty insurance carrier for the policy periods from August 1, 2000 to February 28, 2003 is experiencing financial distress, but is currently paying valid claims
In the event that this insurer’s financial situation deteriorates, we may be required to pay certain obligations that otherwise would have been paid by this insurer
We estimate that the total future claim amount that this insurer is currently obligated to pay on our behalf for the above mentioned policy periods is approximately dlra4dtta7 million; however, our estimate of the potential range of these future claim amounts is between dlra3dtta0 million and dlra8dtta0 million
The actual amounts ultimately paid by us related to these claims, if any, may vary materially from the above range and could be impacted by further claims development and the extent to which the insurer can not honor its obligations
In any event, we do not expect any failure by this insurer to honor its obligations to us to have a material adverse impact on our financial condition; however, the impact could be material to our results of operations or cash flow in a given period
We may incur liabilities or suffer negative financial impact relating to occupational health and safety matters
Our operations are subject to extensive laws and regulations relating to the maintenance of safe conditions in the workplace
While we have invested, and will continue to invest, substantial resources in our occupational health and safety programs, our industry involves a high degree of operational risk and there can be no assurance that we will avoid significant liability exposure
Although we have taken what we believe are appropriate precautions, we have suffered fatalities in the past and may suffer additional fatalities in the future
Claims for damages to persons, including claims for bodily injury or loss of life, could result in substantial costs 13 _________________________________________________________________ [62]Table of Contents and liabilities
In addition, if our safety record were to substantially deteriorate over time, our customers could cancel our contracts and not award us future business
Our use of percentage-of-completion accounting could result in a reduction or elimination of previously reported profits
As discussed in “Critical Accounting Policies” and in the notes to our consolidated financial statements included herein, a significant portion of our revenues is recognized on a percentage-of-completion method of accounting, using the cost-to-cost method
This method is used because management considers expended costs to be the best available measure of progress on these contracts
This accounting method is standard for fixed-price contracts
The percentage-of-completion accounting practice we use results in our recognizing contract revenues and earnings ratably over the contract term in proportion to our incurrence of contract costs
The earnings or losses recognized on individual contracts are based on estimates of contract revenues, costs and profitability
Contract losses are recognized in full when determined, and contract profit estimates are adjusted based on ongoing reviews of contract profitability
Further, a substantial portion of our contracts contain various cost and performance incentives
Penalties are recorded when known or finalized, which generally is during the latter stages of the contract
In addition, we record cost recovery claims when we believe recovery is probable and the amounts can be reasonably estimated
Actual collection of claims could differ from estimated amounts and could result in a reduction or elimination of previously recognized earnings
In certain circumstances, it is possible that such adjustments could be significant
Our dependence upon fixed price contracts could adversely affect our business
We currently generate, and expect to continue to generate, a portion of our revenues under fixed price contracts
We must estimate the costs of completing a particular project to bid for fixed price contracts
The cost of labor and materials, however, may vary from the costs we originally estimated
These variations, along with other risks inherent in performing fixed price contracts, may cause actual revenue and gross profits for a project to differ from those we originally estimated and could result in reduced profitability or losses on projects
Depending upon the size of a particular project, variations from the estimated contract costs could have a significant impact on our operating results for any fiscal quarter or year
We extend credit to customers for purchases of our services, and in the past we have had, and in the future we may have, difficulty collecting receivables from major customers that have filed bankruptcy or are otherwise experiencing financial difficulties
We grant credit, generally without collateral, to our customers, which include electric power and gas companies, telecommunications and cable television system operators, governmental entities, general contractors, and builders, owners and managers of commercial and industrial properties located primarily in the United States
Consequently, we are subject to potential credit risk related to changes in business and economic factors throughout the United States
Our customers in the telecommunications business have experienced significant financial difficulties and in several instances have filed for bankruptcy
A number of our utility customers are also experiencing business challenges in the current business climate
If additional major customers file for bankruptcy or continue to experience financial difficulties, or if anticipated recoveries relating to receivables in existing bankruptcies or other workout situations fail to materialize, we could experience reduced cash flows and losses in excess of current allowances provided
In addition, material changes in any of our customer’s revenues or cash flows could affect our ability to collect amounts due from them
The industries we serve are subject to rapid technological and structural changes that could reduce the demand for the services we provide
The electric power, gas, telecommunications and cable television industries are undergoing rapid change as a result of technological advances that could, in certain cases, reduce the demand for our services or otherwise negatively impact our business
New or developing technologies could displace the wireline systems used for voice, video and data transmissions, and improvements in existing technology may allow telecommunications and cable television companies to significantly improve their networks without physically upgrading them
A portion of our business depends on our ability to provide surety bonds
We may be unable to compete for or work on certain projects if we are not able to obtain the necessary surety bonds
Surety market conditions currently are difficult as a result of significant losses incurred by many sureties in recent periods, both in the construction industry as well as in certain larger corporate bankruptcies
As a result, less bonding 14 _________________________________________________________________ [63]Table of Contents capacity is available in the market and terms have become more expensive and restrictive
We have posted letters of credit in the amount of dlra15dtta0 million to support our surety bond program and have granted security interests in various of our assets to collateralize our obligations to the surety
Further, under standard terms in the surety market, sureties issue or continue bonds on a project-by-project basis and can decline to issue bonds at any time or require the posting of additional collateral as a condition to issuing or renewing any bonds
Current or future market conditions, as well as changes in our surety’s assessment of our operating and financial risk, could cause our surety provider to decline to issue or renew, or substantially reduce the amount of, bonds for our work and could increase our bonding costs
These actions could be taken on short notice
If our surety provider were to limit or eliminate our access to bonding, our alternatives would include seeking bonding capacity from other sureties, finding more business that does not require bonds and posting other forms of collateral for project performance, such as letters of credit or cash
We may be unable to secure these alternatives in a timely manner, on acceptable terms, or at all
Accordingly, if we were to experience an interruption or reduction in the availability of bonding capacity, we may be unable to compete for or work on certain projects
Many of our contracts may be canceled on short notice, and we may be unsuccessful in replacing our contracts if they are cancelled or as they are completed or expire
We could experience a decrease in our revenue, net income and liquidity if any of the following occur: • our customers cancel a significant number of contracts; • we fail to win a significant number of our existing contracts upon re-bid; • we complete a significant number of non-recurring projects and cannot replace them with similar projects; or • we fail to reduce operating and overhead expenses consistent with any decrease in our revenue
Certain of our customers assign work to us on a project-by-project basis under master service agreements
Under these agreements, our customers often have no obligation to assign a specific amount of work to us
Our operations could decline significantly if the anticipated volume of work is not assigned to us
Many of our contracts, including our master service agreements, are opened to public bid at the expiration of their terms
There can be no assurance that we will be the successful bidder on our existing contracts that come up for re-bid
The departure of key personnel could disrupt our business
We depend on the continued efforts of our executive officers and on senior management of the businesses we acquire
Although we have entered into employment agreements with terms of one to three years with most of our executive officers and certain other key employees, we cannot be certain that any individual will continue in such capacity for any particular period of time
The loss of key personnel, or the inability to hire and retain qualified employees, could negatively impact our ability to manage our business
We do not carry key-person life insurance on any of our employees
Our unionized workforce could adversely affect our operations and our ability to complete future acquisitions
As of December 31, 2005, approximately 44prca of our employees were covered by collective bargaining agreements
Although the majority of these agreements prohibit strikes and work stoppages, we cannot be certain that strikes or work stoppages will not occur in the future
Strikes or work stoppages would adversely impact our relationships with our customers and could cause us to lose business and decrease our revenue
In addition, our ability to complete future acquisitions could be adversely affected because of our union status for a variety of reasons
For instance, our union agreements may be incompatible with the union agreements of a business we want to acquire and some businesses may not want to become affiliated with a union based company
Our business is labor intensive, and we may be unable to attract and retain qualified employees
Our ability to maintain our productivity and profitability will be limited by our ability to employ, train and retain skilled personnel necessary to meet our requirements
We cannot be certain that we will be able to maintain an 15 _________________________________________________________________ [64]Table of Contents adequate skilled labor force necessary to operate efficiently and to support our growth strategy
In addition, we cannot be certain that our labor expenses will not increase as a result of a shortage in the supply of these skilled personnel
Labor shortages or increased labor costs could impair our ability to maintain our business or grow our revenues
Our business growth could outpace the capability of our corporate management infrastructure
We cannot be certain that our infrastructure will be adequate to support our operations as they expand
Future growth also could impose significant additional responsibilities on members of our senior management, including the need to recruit and integrate new senior level managers and executives
We cannot be certain that we will be able to recruit and retain such additional managers and executives
To the extent that we are unable to manage our growth effectively, or are unable to attract and retain additional qualified management, we may not be able to expand our operations or execute our business plan
Our failure to comply with environmental laws could result in significant liabilities
Our operations are subject to various environmental laws and regulations, including those dealing with the handling and disposal of waste products, PCBs, fuel storage and air quality
We perform work in many different types of underground environments
If the field location maps supplied to us are not accurate, or if objects are present in the soil that are not indicated on the field location maps, our underground work could strike objects in the soil, some of which may contain pollutants
In such cases, these objects may rupture, resulting in the discharge of pollutants
In such circumstances, we may be liable for fines and damages, and we may be unable to obtain reimbursement from the parties providing the incorrect information
In addition, we perform directional drilling operations below certain environmentally sensitive terrains and water bodies
Due to the inconsistent nature of the terrain and water bodies, it is possible that such directional drilling may cause a surface fracture, resulting in the release of subsurface materials
These subsurface materials may contain contaminants in excess of amounts permitted by law, potentially exposing us to remediation costs and fines
We own and lease several facilities at which we store our equipment
Some of these facilities contain fuel storage tanks which are above or below ground
If these tanks were to leak, we could be responsible for the cost of remediation as well as potential fines
In addition, new laws and regulations, stricter enforcement of existing laws and regulations, the discovery of previously unknown contamination or leaks, or the imposition of new clean-up requirements could require us to incur significant costs or become the basis for new or increased liabilities that could harm our financial condition and results of operations
In certain instances, we have obtained indemnification or covenants from third parties (including predecessors or lessors) for such cleanup and other obligations and liabilities that we believe are adequate to cover such obligations and liabilities
However, such third-party indemnities or covenants may not cover all of our costs, and such unanticipated obligations or liabilities, or future obligations and liabilities, may have a material adverse effect on our business operations or financial condition
Further, we cannot be certain that we will be able to identify or be indemnified for all potential environmental liabilities relating to any acquired business
Risks associated with operating in international markets could restrict our ability to expand globally and harm our business and prospects
While only a small percentage of our revenue is currently derived from international markets, we hope to continue to expand the volume of services that we provide internationally
We presently conduct our international sales efforts in Canada, Mexico and selected countries overseas, but expect that the number of countries that we operate in could expand significantly over the next few years
Economic conditions, including those resulting from wars, civil unrest, acts of terrorism and other conflicts may adversely affect the global economy, our customers and their ability to pay for our services
In addition, there are numerous risks inherent in conducting our business internationally, including, but not limited to, potential instability in international markets, changes in regulatory requirements, currency fluctuations in foreign countries, and complex foreign laws and treaties
These risks could restrict our ability to provide services to international customers and could adversely affect our ability to operate our business profitably
Opportunities within the government arena could lead to increased governmental regulation applicable to us and unrecoverable start up costs
Most government contracts are awarded through a regulated competitive bidding process
As we pursue increased opportunities in the government arena, management’s focus 16 _________________________________________________________________ [65]Table of Contents associated with the start up and bidding process may be diverted away from other opportunities
If we were to be successful in being awarded government contracts, a significant amount of costs could be required before any revenues were realized from these contracts
In addition, as a government contractor, we would be subject to a number of procurement rules and other public sector liabilities, any deemed violation of which could lead to fines or penalties or a loss of business
Government agencies routinely audit and investigate government contractors
Government agencies may review a contractor’s performance under its contracts, cost structure, and compliance with applicable laws, regulations and standards
If government agencies determine through these audits or reviews that costs were improperly allocated to specific contracts, they will not reimburse the contractor for those costs or may require the contractor to refund previously reimbursed costs
If government agencies determine that we engaged in improper activity, we may be subject to civil and criminal penalties
In addition, if the government were to even allege improper activity, we also could experience serious harm to our reputation
Many government contracts must be appropriated each year
If appropriations are not made in subsequent years we would not realize all of the potential revenues from any awarded contracts
We may not be successful in continuing to meet the requirements of the Sarbanes-Oxley Act of 2002
The Sarbanes-Oxley Act of 2002 has introduced many requirements applicable to us regarding corporate governance and financial reporting, including the requirements for management to report on our internal controls over financial reporting and for our independent registered public accounting firm to attest to this report
During 2005, we continued actions to ensure our ability to comply with these requirements
As of December 31, 2005, our internal control over financial reporting was effective, however, there can be no assurance that our internal control over financial reporting will be effective in future years
Failure to maintain effective internal controls could result in a decrease in the market value of our common stock and other publicly-traded securities, the reduced ability to obtain financing, the loss of customers, penalties and additional expenditures to meet the requirements
We may not have access in the future to sufficient funding to finance desired growth
If we cannot secure additional financing in the future on acceptable terms, we may be unable to support our growth strategy
We cannot readily predict the ability of certain customers to pay for past services or the timing, size and success of our acquisition efforts
Using cash for acquisitions limits our financial flexibility and makes us more likely to seek additional capital through future debt or equity financings
Our existing debt agreements contain significant restrictions on our operational and financial flexibility, including our ability to incur additional debt, and if we seek more debt we may have to agree to additional covenants that limit our operational and financial flexibility
When we seek additional debt or equity financings, we cannot be certain that additional debt or equity will be available to us on terms acceptable to us or at all
We may be unsuccessful at integrating companies that either we have acquired or that we may acquire in the future
We cannot be sure that we will successfully integrate our acquired companies with our existing operations without substantial costs, delays or other operational or financial problems
If we do not implement proper overall business controls, our decentralized operating strategy could result in inconsistent operating and financial practices at the companies we acquire and our overall profitability could be adversely affected
Integrating our acquired companies involves a number of special risks which could have a negative impact on our business, financial condition and results of operations, including: • failure of acquired companies to achieve the results we expect; • diversion of our management’s attention from operational matters; • difficulties integrating the operations and personnel of acquired companies; • inability to retain key personnel of acquired companies; • risks associated with unanticipated events or liabilities; and • potential disruptions of our business
If one of our acquired companies suffers customer dissatisfaction or performance problems, the reputation of our entire company could suffer
17 _________________________________________________________________ [66]Table of Contents Factors beyond our control may affect our ability to successfully execute our acquisition strategy, which may have an adverse impact on our growth strategy
Our business strategy includes increasing our market share and presence in the industries we serve through strategic acquisitions of companies that complement or enhance our business
We expect to face competition for acquisition opportunities, and some of our competitors may have greater financial resources or access to financing on more favorable terms than us
This competition may limit our acquisition opportunities and our ability to grow through acquisitions or could raise the prices of acquisitions and make them less accretive or possibly non-accretive to us
Acquisitions that we may pursue may also involve significant cash expenditures, debt incurrence or the issuance of securities
Any acquisition may ultimately have a negative impact on our business, financial condition and results of operations
Our results of operations could be adversely affected as a result of goodwill impairments
When we acquire a business, we record an asset called “goodwill” equal to the excess amount we pay for the business, including liabilities assumed, over the fair value of the tangible and intangible assets of the business we acquire
Through December 31, 2001, pursuant to generally accepted accounting principles, we amortized this goodwill over its estimated useful life of 40 years following the acquisition, which directly impacted our earnings
The Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS) Nodtta 142 which provides that goodwill and other intangible assets that have indefinite useful lives not be amortized, but instead must be tested at least annually for impairment, and intangible assets that have finite useful lives should continue to be amortized over their useful lives
SFAS Nodtta 142, which we adopted in 2002, also provides specific guidance for testing goodwill and other non-amortized intangible assets for impairment
SFAS Nodtta 142 requires management to make certain estimates and assumptions when allocating goodwill to reporting units and determining the fair value of reporting unit net assets and liabilities, including, among other things, an assessment of market conditions, projected cash flows, investment rates, cost of capital and growth rates, which could significantly impact the reported value of goodwill and other intangible assets
Fair value is determined using a combination of the discounted cash flow, market multiple and market capitalization valuation approaches
Absent any impairment indicators, we perform our impairment tests annually during the fourth quarter
Future impairments, if any, will be recognized as operating expenses
Our 4dtta5prca convertible subordinated notes are presently convertible
As a result of our common stock satisfying the market price condition of the convertible subordinated notes during the fourth quarter of 2005, the notes are presently convertible at the option of each holder
We have the right to deliver shares of our common stock, cash or a combination of cash and shares of our common stock upon a conversion of the notes
The conversion period will expire on March 31, 2006, but may resume upon the satisfaction of the market price condition or other conditions in future periods
The number of shares issuable upon a conversion of the notes will be determined based on a conversion rate of approximately dlra11dtta14 per share
The conversion of some or all of our 4dtta5prca convertible subordinated notes into our common stock could cause substantial dilution to existing stockholders
Any sales in the public market of the common stock issued upon such conversion could adversely affect prevailing market prices of our common stock
In addition, the possibility that the notes may be converted may encourage short selling by market participants because the conversion of the notes could depress the price of our common stock
If we elect to satisfy the conversion obligation in cash, the amount of cash payable upon conversion of the notes will be determined by the product of the number of shares issuable at a conversion rate of approximately dlra11dtta14 per share multiplied by the average closing price of our common stock during a 20-day trading period following the conversion of the notes
To the extent that the average closing price of our common stock during this period exceeds dlra11dtta14 per share, we will be required to pay cash in excess of the principal amount of the notes being converted
You are unlikely to be able to seek remedies against Arthur Andersen LLP, our former independent auditor
Our consolidated financial statements for the fiscal years ended prior to December 31, 2002 were audited by Arthur Andersen LLP, our former independent auditor
In June 2002, Arthur Andersen LLP was convicted of federal obstruction of justice charges in connection with its destruction of documents
As a result 18 _________________________________________________________________ [67]Table of Contents of its conviction, Arthur Andersen LLP ceased operations
Although the US Supreme Court overturned Arthur Andersen LLP’s conviction in May 2005, the firm has not resumed operations
You will not be able to recover against Arthur Andersen LLP for its liability under Section 11 of the Securities Act in the event any untrue statements of a material fact are contained in its previously issued audit reports
Even if you have a basis for asserting a remedy against, or seeking to recover from Arthur Andersen LLP, because they have ceased operations, it is highly unlikely that you would be able to recover damages from Arthur Andersen LLP Certain provisions of our corporate governing documents could make an acquisition of our company more difficult
The following provisions of our certificate of incorporation and bylaws, as currently in effect, as well as our stockholder rights plan and Delaware law, could discourage potential proposals to acquire us, delay or prevent a change in control of us or limit the price that investors may be willing to pay in the future for shares of our common stock: • our certificate of incorporation permits our board of directors to issue “blank check” preferred stock and to adopt amendments to our bylaws; • our bylaws contain restrictions regarding the right of stockholders to nominate directors and to submit proposals to be considered at stockholder meetings; • our certificate of incorporation and bylaws restrict the right of stockholders to call a special meeting of stockholders and to act by written consent; • we are subject to provisions of Delaware law which prohibit us from engaging in any of a broad range of business transactions with an “interested stockholder” for a period of three years following the date such stockholder became classified as an interested stockholder; and • we have adopted a stockholder rights plan that could cause substantial dilution to a person or group that attempts to acquire us on terms not approved by our board of directors or permitted by the stockholder rights plan